Exhibit 10.1
FORBEARANCE AND SETTLEMENT AGREEMENT
THIS FORBEARANCE AND SETTLEMENT AGREEMENT ("Agreement") is made as of
March __, 2003, among Interferon Sciences, Inc., a Delaware corporation, with an
office at 000 Xxxxxx Xxxxxx, Xxx Xxxxxxxxx, Xxx Xxxxxx 00000 ("Debtor"), The
American National Red Cross, a charitable and nonprofit corporation with an
office at 0000 Xxxxxxxxx Xxxx, Xxxxx Xxxxxx, XX 00000 ("Lender") and Hemispherx
Biopharma, Inc., a Delaware corporation, with an office at 0000 XXX Xxxxxxxxx,
Xxxxx 000, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000 ("HEB").
BACKGROUND:
A. As of December 28, 1998, Debtor was indebted to Lender in the amount of
One Million Four Hundred Sixty Thousand Eighteen ($1,460,018.00) Dollars
pursuant to the provisions of that certain Supply Agreement dated as of April 1,
1997 by and between Lender and Debtor (the "Supply Agreement"), together with
interest thereon at the rate set forth therein (the "Existing Debt");
B. Subject to the application of any payments made on or after December
28, 1998 and the date of this Agreement, the Existing Debt is currently due and
owing without offset, deduction or counterclaim whatever. Lender is entitled to
exercise all rights and remedies available to it under the Supply Agreement and
in accordance with applicable law, without necessity of further notice or
demand.
C. Debtor has (i) granted and conveyed to Lender a mortgage, dated as of
January 5, 1999 (the "Mortgage"), upon all of the real property and improvements
thereon owned by Debtor (the "Property") as security for the repayment of the
Existing Debt, (ii) entered into a Security Agreement dated as of January 5,
1999 and amended on March __, 2003 ("Security Agreement") granting to Lender a
security interest in certain of Debtor's receivables, inventory, equipment and
net operating losses and (iii) entered into an Assignment of Leases and Rents
dated as of January 5, 1999 (the "Assignment of Leases") assigning to Lender,
Debtor's interest in the rents and leases affecting the Property. The Mortgage,
the Security Agreement and the Assignment of Leases shall hereinafter be
referred to collectively as the "Loan Documents."
D. Lender has agreed to accept $500,000 in settlement of all obligations
of Debtor to Lender, including the Existing Debt; and has agreed to provide
Debtor a period of time to raise such funds, on the terms and conditions set
forth herein.
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NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound hereby agree as follows:
1. The foregoing recitals are hereby incorporated into this Agreement by this
reference.
2. Debtor acknowledges that as of the date hereof, the Existing Debt is
approximately $1.3 million, all of which is due and payable by Debtor to
Lender without defense, setoff or counterclaim (to the extent that any
such defense, setoff or counterclaim now exists or heretofore existed,
Debtor hereby expressly waives and releases same). Debtor further
acknowledges that interest will continue to accrue on the Existing Debt in
accordance with the terms of the Supply Agreement.
3. During the period (the "Forbearance Period") from the date hereof through
the earlier of (i) the date which is 10 days prior to the date (the
"Redemption Date") the court in the Case entitled Sass sets for redemption
of the outstanding tax certificates (provided; however, if ISI receives
notice of the Redemption Date and prior to the date which is 10 days prior
to the Redemption Date the case is terminated with prejudice, this Section
3 (i) shall be of no force of effect), (ii) May 31, 2003, and (iii) an
Event of Default, Lender agrees to forbear in the exercise of the rights
and remedies available to Lender as a result of defaults under the Supply
Agreement or the Loan Agreements.
4. At any time during the Forbearance Period, (i) Debtor shall have the right
to pay Lender $500,000 in full settlement of all obligations of Debtor to
Lender, including the Existing Debt or (ii) HEB shall have the right to
pay Lender $500,000 in HEB common stock, par value $.001 per share, under
the terms set forth on Exhibit A attached hereto, in full settlement of
all obligations of Debtor to Lender, including the Existing Debt. Debtor
and Lender shall exchange general releases at the time of any such
payment, and Lender shall promptly take all actions as shall be necessary
or desirable to release its liens on the property of Debtor and terminate
the Loan Documents. On the date hereof, Debtor is selling its inventory to
HEB and granting HEB a license to sell ALFERON N Injection. As partial
compensation for the inventory and the license, Debtor shall receive
approximately 487,000 shares (the "ISI Shares") of HEB common stock. HEB
is obligated to register the resale of the ISI Shares on a Form S-3
Registration Statement. For a period commencing on the effective date of
the Registration Statement and ending on the earlier of (a) the date 90
days after the effective date of the Registration Statement and (b) the
date on which the registration statement covering the shares issued to the
Lender, described in Exhibit A hereof, is declared effective, Debtor
agrees to pay Lender, within 10 days of the end of each calendar month,
25% of the net proceeds Debtor receives from the sale of the ISI Shares.
Any proceeds paid by Debtor to Lender shall reduce the amount required to
be paid by HEB to Lender under (ii) above and HEB shall issue to Debtor
the number of the shares of HEB common stock which would have otherwise
been issued to Lender. Any such shares issued to Debtor shall have all the
benefits of and be subject to all of the terms set forth in Exhibit A
attached hereto.
5. Upon the expiration of the Forbearance Period, whether through the passage
of time or the occurrence of an Event of Default, if Debtor or HEB has not
made the payment
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contemplated by Section 4, the Existing Debt of Debtor shall be
immediately due and payable in full and Lender shall be free to exercise
all rights and remedies available to it without necessity of notice or
demand to any party. Debtor expressly acknowledges and agrees that Lender
(i) has made no legally binding commitments with regard to the further
forbearance in the exercise of its rights and remedies; and (ii) is not
legally obligated to further modify or amend the payment obligations of
Debtor under the Loan Documents. In addition, Debtor represents and
warrants to Lender that the execution, delivery and performance of this
Agreement does not conflict with any agreement to which the Debtor is
subject.
6. An "Event of Default" shall exist hereunder (a) if any decree or order for
relief is entered by a court having jurisdiction in respect of the Debtor
in an involuntary case under the federal bankruptcy laws, as now or
hereafter constituted, or under any other applicable federal or state
bankruptcy, insolvency or other similar law, or if there is appointed a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or
similar official) of Debtor or for any substantial part of its property,
or ordering the winding-up or liquidation of its affairs and the
continuance of any such decree or order unstayed and in effect for a
period of sixty (60) consecutive days or (b) if a voluntary case is
commenced by the Debtor under the federal bankruptcy laws, as now
constituted or hereafter amended, or under any other applicable federal or
state bankruptcy, insolvency or other similar law, or if Debtor consents
to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or other similar official) of
Debtor or of any substantial part of its property, or if Debtor makes any
assignment for the benefit of creditors.
7. Except as expressly set forth herein with respect to Lender's forbearance
during the Forbearance Period and Lender's agreement to settle all
obligations of Debtor to Lender, including the Existing Debt, the Loan
Documents remain in full force and effect in accordance with their terms.
8. This Agreement shall be governed by and construed in accordance with the
laws of the State of New Jersey.
9. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
10. The rights and remedies set forth herein, or in any other document or
agreement referenced herein, to be vested in or conferred on Lender shall
be cumulative and shall be in addition to and not in substitution of or in
derogation of the rights and remedies conferred upon Lender by any
applicable law.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
DEBTOR:
INTERFERON SCIENCES, INC.
By:
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Name:
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Title:
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LENDER:
AMERICAN NATIONAL RED CROSS
By:
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Name:
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Title:
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HEMISPHERX BIOPHARMA, INC.
By:
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Name:
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Title:
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EXHIBIT A
As set forth in Section 4 of the Forbearance Agreement, HEB shall have the right
to (i) deliver to the Lender, common stock, par value $.001 per share, of HEB
(the "HEB common stock") with a Market Value (as defined below) of $500,000 and
(ii) a guaranty, in the manner and for the period hereinafter provided, in full
satisfaction of all of the Debtor's obligations to the Lender. The date on which
HEB delivers the HEB common stock to the Lender shall be referred to as the
"Settlement Date." The Market Value per share of HEB Common Stock shall be
$1.59. The shares of HEB common stock delivered to the Lender on the Settlement
Date shall be referred to as the "Settlement Shares."
1. Within 30 days of the Settlement Date, but not prior to the effectiveness of
the registration statement covering the shares of HEB common stock issued by HEB
in connection with the sale of Debtor's inventory to HEB, HEB shall file a
registration statement (the "Registration Statement") on Form S-3 with the
Securities and Exchange Commission registering the Settlement Shares for resale,
and use its best efforts to have the Registration Statement declared effective
within 90 days after the Settlement Date. HEB agrees to keep the Registration
Statement effective until the earlier of the date (i) which is two years after
the Settlement Date and (ii) Lender does not own any Settlement Shares.
2. Commencing on the effective date of the Registration Statement ("Effective
Date"), Lender shall have the right but not the obligation to sell the
Settlement Shares. Without the prior written consent of HEB, until the first
anniversary of the Settlement Agreement, Lender agrees not to sell more
Settlement Shares than as provided in the following schedule:
(a) If the closing price of HEB common stock on the ASE the immediately
preceding trading day is less than $ 1.50, Lender can sell the lesser of
(i) 2,000 Settlement Shares and (ii) 6 % of the current day's trading
volume of HEB common stock.
(b) If the closing price of HEB common stock on the ASE the immediately
preceding trading day is greater than or equal to $ 1.50 but less than or
equal to $ 1.99, Lender can sell a number of Settlement Shares equal to
the greater of (i) 2,000 Settlement Shares and (ii) the lesser of 6,000
Settlement Shares and 6 % of the current day's trading volume of HEB
common stock.
(c) If the closing price of HEB common stock on the ASE the immediately
preceding trading day is greater than or equal to $ 2.00 but less than or
equal to $ 3.00, Lender can sell a number of Settlement Shares equal to
the greater of (i) 2,000 Settlement Shares and (ii) the lesser of 8,000
Settlement Shares and 6 % of the current day's trading volume of HEB
common stock.
(d) If the closing price of HEB common stock on the ASE the immediately
preceding trading day is greater than $ 3.00, Lender can sell a number of
Settlement Shares equal to the greater of (i) 2,000 Settlement Shares and
(ii) the lesser of 12,000 Settlement Shares and 6 % of the current day's
trading volume of HEB common stock.
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3. If by the first anniversary of the Settlement Date, the Lender has not sold
all the Settlement Shares; Lender shall, for a period of 30 days commencing on
the first anniversary of the Settlement Date, have the right to deliver to HEB
evidence of the number of Settlement Shares which it still owns and a request
for the guaranty ( the "Guaranty Notice"). Within 10 days of the receipt by HEB
of the Guaranty Notice, HEB shall pay to Lender in cash, an amount (the
"Guaranty Payment") equal to the product received by multiplying (i) the number
of Settlement Shares which remain unsold and (ii) the Market Value.
Simultaneously with the receipt of the Guaranty Payment, Lender shall execute a
stock power transferring the unsold Settlement Shares to HEB. In the event HEB
does not receive the Guaranty Notice within 30 days of the first anniversary of
the Settlement Date the Guaranty Obligation shall be conclusively deemed null
and void.
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